Here's Why I Think Shenguan Holdings (Group) (HKG:829) Might Deserve Your Attention Today

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

In contrast to all that, I prefer to spend time on companies like Shenguan Holdings (Group) (HKG:829), which has not only revenues, but also profits. While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

See our latest analysis for Shenguan Holdings (Group)

Shenguan Holdings (Group)'s Earnings Per Share Are Growing.

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. Over the last three years, Shenguan Holdings (Group) has grown EPS by 10.0% per year. That growth rate is fairly good, assuming the company can keep it up.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. Shenguan Holdings (Group)'s EBIT margins are flat but, of some concern, its revenue is actually down. And that does make me a little more cautious of the stock.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

Shenguan Holdings (Group) isn't a huge company, given its market capitalization of HK$1.2b. That makes it extra important to check on its balance sheet strength.

Are Shenguan Holdings (Group) Insiders Aligned With All Shareholders?

Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

The first bit of good news is that no Shenguan Holdings (Group) insiders reported share sales in the last twelve months. But the really good news is that Chairman of the Board & President Yaxian Zhou spent CN¥2.3m buying stock stock, at an average price of around CN¥0.29. Big buys like that give me a sense of opportunity; actions speak louder than words.

Along with the insider buying, another encouraging sign for Shenguan Holdings (Group) is that insiders, as a group, have a considerable shareholding. Indeed, they hold CN¥156m worth of its stock. That's a lot of money, and no small incentive to work hard. Those holdings account for over 13% of the company; visible skin in the game.

Should You Add Shenguan Holdings (Group) To Your Watchlist?

One positive for Shenguan Holdings (Group) is that it is growing EPS. That's nice to see. Better yet, insiders are significant shareholders, and have been buying more shares. To me, that all makes it well worth a spot on your watchlist, as well as continuing research. Don't forget that there may still be risks. For instance, we've identified 3 warning signs for Shenguan Holdings (Group) (1 is significant) you should be aware of.

As a growth investor I do like to see insider buying. But Shenguan Holdings (Group) isn't the only one. You can see a a free list of them here.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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